Most people are allowed to receive a certain amount of income each year before paying tax. This is known as the basic personal allowance. But what is a Personal Allowance, when can you get it, and what sort of earnings is it actually set against?
Disability Living Allowance is a benefit that provides financial help, so that you can meet mobility or care costs. These days, it's gradually being phased out and replaced by two separate benefits: a Personal Independence Payment and an Attendance Allowance.
Learn more about the basic personal allowance, the Personal Independence Payment and the Attendance Allowance today.
What is a Personal Allowance?
Your Personal Allowance is the amount of money that you can earn each tax year before you pay income tax. It will vary depending on your circumstances.
Will I get a bigger Personal Allowance if I’m over 65?
In previous tax years, your Personal Allowance could have been more than the standard Personal Allowance as a result of when you were born. But this is no longer the case. For the 2021/22 tax year — running from 6 April 2021 to 5 April 2022 — the Personal Allowance is £12,570.
If you have a standard Personal Allowance of £12,570, the following table breaks down the tax rates you will pay for each area of your income:
|UK PAYE tax rates and thresholds|
|UK personal allowance||Up to £12,570||0%|
|UK basic rate||£12,571 to £50,270||20%|
|UK higher rate||£50,271 to £150,000||40%|
|UK additional rate||Over £150,000||45%|
|Scotland PAYE tax rates and thresholds|
|Scottish personal allowance||Up to £12,570||0%|
|Scottish starter tax rate||£12,571 to £14,667||19%|
|Scottish basic tax rate||£14,668 to £25,296||20%|
|Scottish intermediate tax rate||£25,297 to £43,662||21%|
|Scottish higher tax rate||£43,663 to £150,000||41%|
|Scottish top tax rate||Over £150,000||46%|
However, your Personal Allowance could be higher or lower if you meet certain criteria.
Why you could get more personal allowance
- Are you married, or in a civil partnership?
If you are, the Government's Marriage Allowance offers the opportunity to transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. However, you must earn less than your partner and have an income less than £12,570 per annum to be eligible. Your partner's income will also need to be between £12,571 and £50,270 per annum (or £43,662 per annum if you are in Scotland). Please note that these are figures for the 2021/22 tax year. Your partner’s tax bill would be reduced by £252 (£1,260 x 20%).
- Are you registered with your local council as blind, or severely sight impaired?
Should the answer be 'yes', then you can contact HM Revenue and Customs (HMRC) to apply for Blind Person's Allowance. If you are eligible, this adds a further £2,520 to your yearly tax-free Personal Allowance. Please note that these are figures for the 2021/22 tax year.
Why you could get less
- You earn over £100,000
Your Personal Allowance goes down by £1 for every £2 that your income is above £100,000. This means your personal allowance could reduce to zero if your income is above a certain level.
If you earn £110,000 then £10,000 of your salary is above £100,000.
10,000 / 2 = 5,000
So your Personal Allowance would reduce by £5,000.
£12,570 - £5,000 = £7,570.
Adjusted Personal Allowance = £7,570.
- You earn £125,140 or over
In this case no personal allowance is available.
What counts as income for the Personal Allowance?
Income refers to not only earnings from employment, but also rent income, any dividends from shares you may own, your pension income and any interest you earn on savings (before the tax is taken off). But it's worth bearing in mind that from 6 April 2016 the Government introduced a Personal Savings Allowance and a Dividend Allowance.
Your Personal Savings Allowance is a tax-free allowance from any income that you receive from savings or any interest that you earn on your savings. This is currently £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers do not get any Personal Savings Allowance.
The first £2,000 of any payments that you receive from dividends (which you would get if you own any shares in a company) are also tax free. You’ll pay tax on any dividends you receive over £2,000 at the following rates:
- 7.5% on dividend income within the basic rate band
- 32.5% on dividend income within the higher rate band
- 38.1% on dividend income within the additional rate band
Please note that dividends received in shares held in an ISA will continue to be tax free.
The best place to find every up to date detail of the Personal Allowance is the Gov.uk website. Read their webpage about Personal Allowances rates here.
What is a Personal Independence Payment?
It's a tax-free payment to you from the government, to help you look after yourself. A Personal Independence Payment is made up of two parts – a 'daily living part' and a 'mobility part'. It's available to people aged between 16 and the State Pension Age.
How much Personal Independence Payment will I get?
It depends on how mobile you are and how much care you need. In 2021/22 you would get the highest amount of benefit (£152.15 per week) for severe conditions – but the lowest amount (£23.70 per week) if you needed much less care. The first figure is based on receiving the highest weekly rate for both the daily living and the mobility parts. The second figure is based on receiving the lowest weekly rate for just the mobility part.
You can find out which Personal Independence Payments you may qualify for, on the government's Personal Independence Payment web pages.
What is Attendance Allowance?
This benefit is also tax free. It's for people who have reached the State Pension Age who need someone to look after them because of their disability. It's at two rates – higher and lower:
- higher rate (£89.60 per week): you need help or supervision throughout both day and night, or you're terminally ill;
- lower rate (£60.00 per week): you need frequent help during the day or supervision at night.
You can find out which Attendance Allowance rate you may qualify for, on the government's Attendance Allowance web pages.
The government wants to make sure these are relatively easy claims processes. Please read the government's web pages for more detailed information.
Is there any other disability allowance I could claim?
If someone in your family or a close friend is looking after you, and you have substantial care needs, that person could claim for the Carer's Allowance. As a family, that could help you financially, although a carer does not need to be related to you or live with you to qualify for that benefit.